Apple announces $110bn share buyback after quarterly profit and revenue drop

The company's stock surged almost 12% in after-hours trading on Thursday

Visitors look at new iPhones during an Apple event in September in Cupertino, California. AFP

Apple announced its largest share buyback programme, worth $110 billion, on Thursday after reporting an annual drop in its March quarter net profit and revenues.

Apple’s chief financial officer Luca Maestri said the board has authorised the share repurchases “given our confidence in Apple’s future and the value we see in our stock”.

The Cupertino-based company reported a 2.2 per cent annual drop in the 2024 fiscal second-quarter net profit to more than $23.6 billion. Its earnings per share stood at $1.53.

Revenue during the January-March period dropped more than 4 per cent to $90.8 billion, slightly exceeding analysts’ estimates of $90 billion.

But chief executive Tim Cook said he expects a sales growth in the current quarter as the company increases its investment on artificial intelligence-driven features that will be announced in coming months.

Apple chief executive Tim Cook. EPA

“More than ever in the past decade, the company needs new products and solutions that will shift its behemoth operating costs back into the sustained growth path,” Thomas Monteiro, senior analyst at Investing.com, told The National.

"Against this backdrop, Apple will need massive mid-term investor support and trust, which is why it announced its largest-ever round of buybacks.”

After the earnings announcement, Apple stock surged 11.6 per cent to trade at $184.64 a share in after-hours trading on Thursday.

It closed 2.20 per cent up at $173.03, giving the company a market value of $2.67 trillion.

Its stock has dropped almost 7 per cent since the start of the year.

Falling iPhone sales

iPhone sales accounted for more than half of the company's total revenue in the last quarter.

They dropped 10.4 per cent to nearly $45.9 billion in the quarter from the year before period, missing analysts’ estimates of $46 billion.

Analysts said the decline in sales indicates a lacklustre demand for the latest generation of iPhone 15 series, which was launched in September.

In its defence, Mr Cook said last quarter’s iPhone sales faced tough comparison with the previous year period, during which the company recorded $5 billion in deferred iPhone 14 sales stemming from supply issues caused by the Covid-19 pandemic.

The company’s total revenue from its services division grew about 14 per cent annually to almost $23.9 billion, while revenue from wearables, home and accessories products dropped 9.6 per cent annually to more than $7.9 billion.

It was an all-time revenue record in the company’s services division.

Revenue from iPads and computers dropped almost 6 per cent to more than $13 billion.

“Thanks to very high levels of customer satisfaction and loyalty, our active installed base of devices has reached a new all-time high across all products and all geographic segments,” said Mr Maestri, without disclosing the exact number.

Why Tim Cook is optimistic about China

Apple’s sales in the Americas region accounted for more than 41 per cent of the company's total second-quarter revenue, with more than $37.2 billion.

It was followed by Europe and the Greater China market (China, Hong Kong and Taiwan), which added $24.1 billion and $16.3 billion, respectively, to the company’s revenue.

A man uses uses Apple Vision Pro glasses in Rio de Janeiro, Brazil. AFP

In Europe, sales remained flat while they dropped 8 per cent in the Greater China market.

Apple is facing stiff competition in China from local brands such as Huawei, Xiaomi and Oppo. But Mr Cook is optimistic about the Chinese market’s future potential.

“I feel good about China. I think more about long term than to the next week or so,” Mr Cook told CNBC.

Japan and the rest of the Asia Pacific market added more than $12.9 billion to Apple’s second-quarter sales, an annual drop of 15 per cent.

Apple said its board of directors had declared a cash dividend, payable on May 16, of $0.25 for each share of the company’s common stock.

Its cash and cash equivalents surged 9.1 per cent annually to more than $32.6 billion as of March 30.

Why Apple needs more futuristic products like Vision Pro

In February, Apple also entered the augmented reality headset market with the launch of the Vision Pro.

With a hefty price of almost $3,500, the product has had a slow start and may take few years before it significantly contributes to Apple's revenue, analysts said.

"However, the sustained downtrend in iPhone sales and pressured margins show that the revenue growth plateau is more than a regional problem and should keep on deepening without new, more innovative products," Mr Monteiro said.

Apple is expected to announce a range of new products at an event next week, and at its Worldwide Developers Conference in June.

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  Apple unveiled its first Macintosh computer on January 24, 1984. AFP

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  Macintosh – an intuitive personal computer known as the Mac – transformed the landscape of mass-market computing with its revolutionary graphical user interface (GUI), catchy icons and a mouse. Photo: Bonhams

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  Chief executive Tim Cook is blown away as he is shown an original Macintosh SE computer at the opening of Mumbai's first Apple Store in April 2023. AFP

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  The Apple II, which predates the Mac, was a successful product for the tech company. AFP

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  Computers from various generations on display at an Apple Museum in Warsaw. AFP

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  Apple's then-interim chief executive Steve Jobs unveils the iMac, based on the PowerPC G3 processor, in 1998. AFP

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  Mr Jobs holds a new 12-inch Apple G4 Powerbook laptop computer, left, and a G4 Powerbook after addressing the Macworld Conference and Expo in San Francisco, 2003. Reuters

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  The new MacBook Pro laptop launched in 2016 included an upgraded retina display. Bloomberg

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  Apple chief executive Tim Cook presents new products, including Macbook laptops, at a special event at the Brooklyn Academy of Music in October 2018. AFP

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  The MacBook Air is unveiled at the Apple Worldwide Developers' Conference at Apple Park campus in Cupertino, California in June 2022. Bloomberg

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  Mac computers on display at the Apple Store in Yas Island. Mona Al Marzooqi / The National